Without the Right Questions, the Answers Will Always Be Wrong

With the plethora of advertising about Forex Trading chances are,you have tried your hand at a demo account by now. Odds are you have made ahandsome profit, jumped onto the bandwagon of “Forex Trader”.

Theimprobable overnight Millionaire Dreamleads many to an addiction to Forex Trading.

By this time majority will quit forex trading, their pockets can't sustain further drawdowns.

1% will double or triple their deposit and look to Revenge Trade, use excessive leverage and be washed out for the final time with a bad taste in their mouths.

Recognise:

A lot of Forex Internet wisdom centres around:

"Planyour Trade, Trade your Plan." Wise advice.

1- How doI make a "PLAN"?

2- How doI know its the right "PLAN"?

I have never received a straight forward answer to these questions.

Think about it, these question are not complete.(Different peopledifferent lives)

This article will try to guide you to the start of your plan andpush you to ask the correct/complete questions.

The Holy Grail is:

Without the right questions, theanswers will always be wrong.

STEP 1 - FACEFACTS: Beating the cycle

1. Take a seat, Pullup your daily trading history

2. Pull the chartsback to the time of trade execution(Open), list the following:

i) 3Reasons why the trade was taken?

ii) What is theRisk-Reward ratio of the trade?

iii) What is the Lossin terms of percentage of your Starting Capital?

Congratulations!You now have information about your trading style.

NOW WE GET TO THE IMPORTANT PART:

Which are the correctcomplete questions need to answer using the above:

Assumptions:

Trader Type: BeginnerNo. ofTrades: 100

1-Were you gambling?

Any trades:

a)Without Reasons

b)No Stop-loss or Take-profitinformation

c)Leverage used makes the SL hitmore than 5% of Capital.

Any of the above should be classified asGambling.

How to break this habit?

Self-discipline is the hardest part of becoming a Trader.

For an amateur, the best way to get out of the Gambling habit is:

i)Enter a trade only afterlisting:

Reasons behind the trade, Risk-reward, Effecton capital

Do this with a pencil and paper. It will immediately reduce the number of suchtrades.

A physical Trade Journal is essential for beginners and recommended for all.

Remove all profitable Gambling trades from the data.

2-Was the Trade Size correct?

Some trades in the Loss column will have:

i) Correct reasons

ii) Stop-loss and Take-Profit(Risk-Reward) – Perfect

iii) Size of Trade – INCORRECT

This is the most frustrating of all losses, the position was profitable but theTrade size made it impossible(Margin call) to hold till Stop-loss.

When starting out:

Decide Maximum Stop-Loss value in USD terms.

Based on the above:

Decide Maximum number of Open Positions at any point of time

Decide Maximum Position size

This is the Starting point of your Plan. Makea List of questions – answer them yourself. The next part will start with allthe essential questions and a dissection of the various answers along with theNEXT STEP:

However, in my opinion the problem starts much earlier and has to do with the actual definition of the strategy and the corresponding money management. Doing it “post mortem” means for many people the literal translation of “doing the examination after death” (of their account).

Every novice trader should have a mentor. A good and honest one. I wasn’t that lucky and wasted a lot of time and money going in the wrong direction. My "mentor" benefited, of course.

Novice traders, get an honest mentor. S/he will cost some money but it wil be money well spent.

The greatest mentor that I have had since now was self learning. From my own mistakes, from my own losses on real accounts where I saw what emotional trading really is. Real Traders are the ones that can recover from the early losses and fight for their dream and passion. All traders should look back to their losses and put themself the questions that you suggest here. Good advices. Good luck in the contest. +!

@OneGoodTrade, doctoryby: Thanks. I would share a lot more, continue the series to the end point(which is changing mindset into an analytical machine). Wont do much good here though where the newbie readers are interested only in being spoon fed. I wouldn't even care about "article contest" as long as a few people were interested. May post it somewhere else though. Cheers